NJ Bar Health Law Section Opens With Program On Health Reform

     The New Jersey State Bar Association's Health Law Section kicks off its 2012-2013 meeting year on September 11th with a program entitled: "Health Reform Is Alive And Well...Sort Of...The View From Providers And Insurers." It begins with a light dinner at 6:00 p.m. at the Law Center in New Brunswick.

     Three outstanding speakers will address the current status of the Affordable Care Act from the standpoint of hospitals, physicians and health insurers, the client constituency groups represented by most members of the Health Law Section.

     Russ Molloy, Esq., V.P. of Government Relations at Meridian Health, will examine the law's impact on hospitals, including the aftermath of the recent Supreme Court decision, and the political climate in New Jersey for Medicaid expansion and a health insurance exchange.

     Lawrence Downs, Esq., CEO and General Counsel of the Medical Society of New Jersey, will address the effects of the ACA on practicing physicians in New Jersey.

     Wardell Sanders, Esq., President of the New Jersey Association of Health Plans, will discuss insurance market reforms under the ACA, including health insurance exchanges, essential health benefits, reinsurance, risk adjustment and risk corridors.

     The program has been approved for 1.6 Credits (50 minute hour) by NJ ICLE. If you attend, please stop by and say hello.

 [Image: Impending Storm, by David Wright, September 25, 2005]

NJ Bar Health Law Section Announces Programs For 2012-2013

     I am honored to serve as Chair of the New Jersey State Bar Association's Health Law Section for the upcoming year. The Section includes 446 members of the Bar who represent healthcare providers and other clients relating to the health care field. The Section's Board recently approved a schedule of meetings and programs that I'd like to share with you.

  • September 11, 2012 : The aftermath of the SCOTUS decision on the Affordable Care Act (Law Center)
  • October 19, 2012: Annual Health Law Symposium (Seton Hall Law School)
  • November 13, 2012: The View From Trenton After Election Day - NJ Commissioner of Health (invited) (Law Center)
  • December 11, 2012: Holiday reception and roundtable on in-house/outside counsel relationships and alternative fee arrangements (Law Center)
  • January 8, 2013: Brown bag lunch program on Ethics For Health Lawyers (law firms throughout NJ, t/b/d)
  • February 5, 2013: Medical Staff Due Process v. Hospital's Duty As Employer And A Hostile Work Environment (Law Center)
  • March 12, 2013: Joint program with NJ Hospital Association In-House Counsel on Current Tax Exemption Issues (NJHA, Princeton)
  • April 16, 2013: Alternative Dispute Resolution in Healthcare (Law Center)

     These programs are open to all members of the NJSBA. If you are not a member, please consider joining, or request to attend as a guest. In most cases, CLE credits and dinner are provided, and you will not be disappointed. Contact me directly if you have any questions.

Does Healthcare Reform Require Hospital v. Physician Power Struggle?

     Writing in John Goodman's Health Policy Blog, Larry Wedekind suggests that real healthcare reform will require physicians, not hospitals, to acquire control of our healthcare delivery system. His entire post is worth the read, but it can be summarized as follows:

1. All of the pilot programs and demonstration projects tried by the federal government to date have been disappointing at best.

2. The traditional pattern of de facto hospital control of the delivery system is like letting the fox guard the henhouse. Since hospitals need to fill beds and expand outpatient volume, their efforts to acquire physicians' practices and develop integrated delivery systems should be seen as thinly veiled efforts to feather their own nests.

3. Physicians alone are capable of taking action to improve their patients' health. By putting physicians "in charge" of the delivery system, patient-centered care coordination can become a reality.

     Mr. Wedekind seems to assume that only one side can be "in charge" of the healthcare delivery system. What many hospitals now realize is that only by way of a jointly determined approach will most hospitals and many physicians survive.

     Hospitals cannot prosper in the long run by simply "paying for referrals" and relying on volume rather than measurably improving their patients' health. Physicians lack the skill, time, facilities and capital required to build the infrastructure that patient-centered care coordination will require. Each side has what the other needs to succeed.

     The trick will be how well and how quickly these parties are able to transform their historical relationships into a new and better way of doing business. Some hospitals and their medical staffs are well on their way, while others have yet to begin. All will encounter stumbling blocks along the way. In addition to the usual business issues that arise in any partnership or joint venture, the hospital-physician relationship is incredibly burdened by laws and regulations that preclude many arrangements that would be perfectly legal in any other industry.

     The key for hospitals and physicians will be to realize that both parties have a hand on the steering wheel, and that a failure to steer in the same direction will be disastrous. Essential to this process will be having a means to identify and resolve conflicts early and effectively. Governance by litigation is not an option.

[Image: Two pilots prepare to launch from the carrier USS Harry S. Truman in the Persian Gulf, December 26, 2004]

How Not To Conduct A Medical Staff Fair Hearing

     If you want to know what you shouldn't do when conducting a medical staff fair hearing, read the opinion of the Federal District Court for the Northern District of New Mexico in Osuagwu v. Gila Regional Medical Center (2012 U.S. LEXIS U325). Fellow Lexblogger Michael Cassidy brought this case to my attention via his Med Law Blog. Among other things, the hospital and medical staff leadership in this case:

1. Allowed one physician to act as the "investigator," the "prosecutor," an expert witness and a member of the hearing panel;

2. Did not provide the accused physician with the opportunity to cross examine the physicians who rendered expert opinions against him;

3. Did not make a reasonable effort to obtain all of the facts relevant to the cases under review; and

4. Did not clearly articulate the specific reasons for taking the harsh measure of indefinitely suspending the accused physician's privileges.

     On the basis of these findings, the federal district court denied the hospital's motion for summary judgment under the immunity provisions of the Healthcare Quality Improvement Act ("HCQIA"). Since most hospitals' medical staff bylaws and fair hearing procedures are largely intended to assure the benefits of HCQIA immunity, and it is rarely denied, this case is noteworthy.

     Michael Cassidy's post suggests that the admission of written expert reports without the opportunity for the accused to cross examine the expert was a factor in this case that may gain broader traction in medical staff hearing litigation. I hope not. As he points out, most medical staff bylaws relax the rules of evidence, and the admission of written reports without testimony is not uncommon. So long as the accused physician is offered the right to do the same, and if there is some in person expert testimony offered, an otherwise sound fair hearing should not fall outside HCQIA immunity solely by reason of including a hearsay expert report. It was a contributing factor in Osuagwa, but only because the rest of the hearing was so deficient.

[Image: Paul Gaugin's Chair (The Empty Chair), Vincent van Gogh, 1888]

Who Pays The Hospital - Medical Staff Standing Neutral?

     See my guest post today at Disputing: Who Pays the Hospital - Medical Staff Standing Neutral? This is a follow up to the four part series on the Hospital - Medical Staff Standing Neutral that appeared here (See Part I, Part II, Part III and Part IV). If you haven't seen it before, Disputing is a terrific ADR blog, and I'm grateful for the opportunity to appear there.

[Image: Pennybacker Bridge, Austin, Texas, 1997, by Eric Hunt]

Healthcare Subject Matter Expertise - An Arbitrator's Blessing or Curse?

     Today I listened to a roundtable discussion on "Handling Healthcare Arbitration Effectively" presented by the American Health Lawyers Association. The Panel offered valuable practical tips on drafting an arbitration clause and effectively representing a client in arbitration. From my perspective, the most interesting portion of the discussion concerned the role of healthcare industry expertise in the process of arbitrator selection.

     One of the Panelists expressed the belief that experience with healthcare business and legal issues is rarely necessary for an arbitrator to effectively decide a case, so  long as he or she is "experienced in handling complex commercial cases." In his view, an experienced arbitrator can learn all he needs to know about the healthcare law affecting a case in legal counsel's briefs and oral arguments.

     I beg to differ. I do not believe that I can become an expert at anything by tomorrow. More importantly, even assuming an arbitrator can absorb the basic, "black letter law" on a given issue during the presentation of a case, it is impossible for that arbitrator to have any grasp of the nuances or "feel" of the law as it is applied in the real world. Often, it is in that nuanced, "gray" area of healthcare law and practice that the outcome of an arbitration must be decided.

     Another Panelist addressed the process of selecting an arbitrator where industry expertise is desired, but there is a need to evaluate the potential arbitrators' "orientation." I think this was a polite way of saying that some clients may fear an arbitrator will be biased against them if the arbitrator's legal career was mostly spent "on the other side of the fence." Thus, for example, parties in a payor-provider dispute might look differently at potential arbitrators who had mainly represented health insurers versus those who had primarily represented hospitals. Although I certainly can understand this as a visceral reaction, it doesn't really hold up to scrutiny.

     If parties want an arbitrator with subject matter expertise, they will be hard pressed to find one who has not had a successful legal practice primarily on one side or the other of the transactions and disputes typical in that field (think labor v. management, plaintiff v. defendant, insurer v. insured). So unless only one of the parties to an arbitration is concerned about the arbitrator's "orientation," there will be no agreement on an arbitrator with industry expertise.

     More importantly, the focus on a potential arbitrator's "orientation" ignores the fact that the arbitrator is holding himself out as a neutral - with full awareness of the fact that setting personal feelings (if any) aside is essential to performing that service ethically and professionally. This is no different from the duty of a sitting judge in maintaining his neutrality. Unless an actual conflict of interest exists, judges and arbitrators should be assumed to be neutral - it is the essence of what they do. Would a person seeking to pursue this line of work expect to have much success if his or her decisions were skewed toward one category of litigants versus another?

     Far better than attempting to predict the effects of a potential arbitrator's "orientation" is seeking the opinion of the marketplace on whether he or she is  honest, open-minded and fair. Arbitrators who fail this market test will not be around for long.

[Image: Flower vendors in the Main Arcade, Pike Place Market, Seattle, Washington. To be allowed to sell here, vendors must grow the flowers themselves; by Joe Mabel, October 10, 2008]

Selecting A Hospital-Medical Staff Standing Neutral

       This fourth and final installment on the Hospital-Medical Staff Standing Neutral will address the neutral selection process. Previous posts introduced the concept, its advantages and relation to Joint Commission requirements, and how to define the neutral's role.

       The essence of the standing neutral concept is: (1) an expert, neutral person is selected in advance by both parties to an ongoing transaction or relationship; (2) the neutral is given sufficient information to be familiar with the parties as problems arise; and (3) the neutral remains readily available to assist the parties in resolving disputes quickly and efficiently. The neutral selection process should reflect these expectations.

       The process of selecting a hospital-medical staff standing neutral is best undertaken by a committee representative of the interests likely to be involved in the conflicts to be managed. On the hospital side, this might include a member of the board of trustees, the hospital CEO, the CMO and in-house counsel. On the medical staff side, the group might include the current president of the medical staff, the immediate past president or president elect, and the Chiefs of Medicine and Surgery. If hospital in-house counsel will participate, and the medical staff has regular independent counsel, medical staff counsel should also be included.

       The selection committee should attempt to identify a person who can carry out the standing neutral's responsibilities. That person would be:

1. Neutral (i.e. have no no current or recent relationship with any of the parties);

2. Expert in the subject matter of the likely disputes (probably a lawyer specializing in hospital-physician matters);

3. Trained and experienced in dispute resolution processes;

4. Readily available as conflicts arise; and,

5. Cost effective.

Above all, the neutral selected should have the confidence of both the hospital and the medical staff.

       With the selection of a qualified standing neutral and a commitment to the process of conflict management, hospitals and medical staffs can better face the challenges that threaten the relationships so vital to their existence.

[Image: Football referees at a Razorback game, October 6, 2007, by Belinda Hankins Miller]

NJ Bar Section Offers Brown Bag Lunch On Antitrust Developments In Healthcare

       The New Jersey State Bar Association's Health and Hospital Law Section is offering an interesting program in an alternative format. The program will address antitrust developments related to various forms of integration among healthcare providers: hospital - hospital, hospital - physician, and physician group - physician. Antitrust specialist David A. Ettinger, Esq. will speak on these subjects, with Frank R. Ciesla, Esq. focusing the discussion on the landscape in New Jersey.

       The format for the program, a "brown bag lunch," is a first for the Section. Rather than an in-person presentation in the evening at one central location, this program will be offered on March 22 from 12:00 to 1:00 p.m. via teleconference at six law firms throughout the state. Choice of location can be made upon registration on the NJSBA website. CLE credit is included.

[Image: Lunch scene at the National Cancer Institute, 1989]

Part 3- Defining The Role Of The Hospital-Medical Staff Standing Neutral

     I previously introduced the concept of the hospital-medical staff standing neutral, and how satisfaction of Joint Commission conflict resolution requirements and other advantages argue for its use. This Part 3 of the series will turn to the potential roles a standing neutral can fulfill. There is no blueprint to follow on this, nor should there be. The parties are free to define both the functions to be performed by the standing neutral, and the kinds of disputes that will fall within the standing neutral's purview. The hospital and the medical staff will need to agree on these things up front.

     In all cases, the essence of the concept is that the standing neutral is selected in advance of any dispute, is given information sufficient to be familiar with the parties as problems arise, and remains readily available to deal with disputes quickly and efficiently.

     The functions to be performed by the standing neutral can span the range of dispute resolution processes. Some parties may simply want a standby facilitator, who can jump in to assist the parties when their direct negotiations have stalled. A step up from this would be a formal mediation process. Other parties may want the neutral to hear from both sides and offer a non-binding recommendation for the resolution of their disputes. The parties may want the neutral to make a binding decision, effectively acting as an arbitrator. The standing neutral also may serve as a hearing officer pursuant to the fair hearing procedures under the medical staff bylaws. All of these may be used in different circumstances, individually or in combination, as suited to the parties' situation.

     As for the kinds of disputes that will fall within the standing neutral's purview, the parties may consider disputes arising from some or all of the following:

- proposed changes to medical staff bylaws, policies and rules

- "turf battles" between members of the medical staff and the executive committee and/or the board of trustees

- credentialing and discipline of individual practitioners

- implementation or restructuring of hospital physician payment initiatives, including managed care networks, Accountable Care Organizations and "gainsharing"

- "economic credentialing"

- hospital-physician joint ventures

     Next up, selecting a hospital-medical staff standing neutral.

[Image: a child amateur boxing exhibition match in Union City, New Jersey, July 1, 2010, by Luigi Novi]

Part 2 - Joint Commission Conflict Resolution Requirements And The Advantages Of A Hospital-Medical Staff Standing Neutral

     I previously introduced the concept of the hospital-medical staff standing neutral. In this Part 2 of a series, I will cover relevant Joint Commission requirements, and the advantages and drawbacks of using a hospital-medical staff standing neutral to resolve conflicts between hospitals and their medical staffs.

Joint Commission Requirements

     Joint Commission Leadership Standard LD.02.04.01 requires that "the hospital manages conflict between leadership groups to protect the quality and safety of care." The Elements of Performance supporting this standard require that "senior managers and leaders of the organized medical staff work with the governing body to develop an ongoing process for managing conflict among leadership groups."

     Similarly, Joint Commission Medical Staff Standard MS.01.01.01 requires that "Medical Staff bylaws address self governance and accountability to the governing body, including by way of Element of Performance 10, which says in part:

"The organized medical staff has a process which is implemented to manage conflict between the medical staff and the medical executive committee on issues including, but not limited to, proposals to adopt a rule, regulation, or policy or an amendment thereto."

     It is clear that the Joint Commission expects each hospital and its medical staff to have a dispute resolution mechanism in place. However, other than for the basic elements of the process (set forth in the Elements of Performance under LD.02.04.01), the Joint Commission leaves it up to each hospital and medical staff to fashion their own means of compliance. Most have simply adopted policies that mimic the Joint Commission's directives, but are short on detail, essentially leaving conflict resolution to a case-by-case process. Unfortunately, this typically results in the parties falling into their familiar routine: "lawyering up" and setting the litigation machine into motion. Establishment of a hospital-medical staff standing neutral fundamentally alters this habit - and its advantages far outweigh its drawbacks.



     1. Enables self-determination. The hospital and the medical staff remain in control of their relationship and the resolution of their differences, rather than abdicating to the legal system.

     2. Saves time. The standing neutral can be activated at a moment's notice. Once involved, the neutral's use of alternative dispute resolution processes can bring about a resolution more quickly than traditional legal proceedings.

     3. Less costly. The parties will spend less on lawyers and incur lower internal costs by resolving their disputes more quickly and efficiently.

     4. Creates trust and confidence. Because the parties have jointly selected the standing neutral, and jointly defined the neutral's role, they can be confident that the process used to resolve their dispute will be fair.

     5. Preserves relationships. Rather than "slugging it out" through legal proceedings, parties using a standing neutral are encouraged to cooperate in a process that will yield a fair result.

     6. Reduces the occurrence of disputes. Experience in the use of standing neutrals in the construction industry suggests that parties using this mechanism come to have fewer dispute as time goes on. This occurs because that each party realizes its position on any given issue will be quickly and candidly reviewed by a neutral who will hold both parties to the same standard of good faith and reasonableness. This forum does not favor hyperbole, stonewalling, bluffing and other tactics common to the traditional legal process. Accordingly, parties over time tend to self-regulate their demands and positions to more naturally coalesce around their common objectives.


     The establishment of a hospital-medical staff standing neutral is not without some perceived drawbacks.

     1. Cost. The cost of the standing neutral must be considered. However, when compared to the internal costs and legal fees associated with resolving disputes through conventional means, this cost is minimal.

     2. Loss of control. Some parties and their legal counsel may feel that the presence of a third party neutral will interfere with the party's ability to "control" the handling of disputes that arise. But the neutral only has whatever authority the parties agree upon in advance. In reality, parties have far less "control" over the process and outcome of conventional litigation than they might think. 

     3. Fear of bias. If a party believes the standing neutral is biased towards the interests of the other party, the process is bound to fail. This is why both parties must participate actively in the selection of the standing neutral. It also means the neutral must work diligently to remain unbiased and appear to be unbiased throughout the engagement.

     4. Confidentiality. Introduction of a standing neutral to the parties' discussions opens up the possibility that confidences will be disclosed. The parties must believe that the selected neutral will honor the obligations of confidentiality imposed under the parties' agreements and by law.

     Next up, defining the role of the hospital-medical staff standing neutral.

[Image: Unbalanced scales, January 8, 2007, via Wikimedia Commons]

The Hospital-Medical Staff Standing Neutral - Part 1

     The idea of a "standing neutral" is well known within the construction industry, and has been used there in various forms for many years. The construction standing neutral is a trusted expert selected by the owner and the contractor at the outset of a project who remains available until the project's conclusion to assist the parties in resolving disputes as they arise. A standing neutral for construction projects works well because the parties have an ongoing relationship, and a mutual need to resolve disputes quickly and efficiently.

     Hospitals and their organized medical staffs stand in a similar posture, but with even greater interdependence. Their relationship is ongoing, indeed, it's perpetual. Rather than a contractual arrangement in which the parties exchange money for goods and services, the relationships between hospitals and their medical staffs are symbiotic. The hospital needs the members of its medical staff to admit and care for patients, and needs the organized staff to oversee and regulate the practice of medicine within the hospital's facilities. The members of the medical staff need the facilities, equipment, nurses and other personnel that the hospital provides, and the physicians cannot afford.

     The smooth functioning of the hospital-medical staff relationship is crucial to their common economic well-being. As forces beyond their control strain that relationship, conflicts will arise. Just as in the case of an ongoing construction project, the parties can choose to address these conflicts on an ad hoc basis, or proactively provide for a mechanism that stands ready to resolve conflicts as they arise: the hospital-medical staff standing neutral.

     This is the first in a series of posts on this subject. It is drawn from an article I wrote in the September-October issue of the Physician Executive Journal ("PEJ") (subscription required). Future posts will address the advantages of a hospital-medical staff standing neutral, including Joint Commission standards on conflict resolution that favor its use; defining the role of the hospital-medical staff standing neutral; and the process for selection of a hospital-medical staff standing neutral.

[Image: Chair umpire referee on court 18 at Wimbledon 2006, via Wikimedia Commons]

Reshaping Doctors' Compensation - Be Careful What You Wish For

       Healthcare reform measures and the prevailing wisdom of industry visionaries tell us that the way we pay our doctors must change. In a nutshell, we're told that doctors paid on a "piecemeal" basis: have an incentive to order and do more work (at greater cost); treat the immediate condition rather than the whole patient; and are disconnected from any responsibility for the real, total cost of their patients' care. Thus, the push towards "accountable care" calls for remaking doctors' compensation models to discourage piecemeal work, reward patient satisfaction and instill awareness of total system costs. Government agencies, health insurers and hospitals that regularly deal with doctors' compensation are anxious to put this theory into practice.

 But be careful what you wish for.

        At least some evidence shows that patient satisfaction doesn't indicate the best medical care. Writing at KevinMD.com, Kevin Pho, M.D. acknowledges that patient satisfaction scores are a good way to identify ways to improve the patient experience, and that "happy patients" are far less likely to file malpractice claims. He also recognizes that patient satisfaction generally translates into higher revenue for hospitals. On the other hand, studies do not indicate a strong correlation between patient satisfaction and quality of care. In fact, the compulsion to make patients happy by "giving them what they want" may run counter to both quality and cost considerations.

       Another serious challenge to the prevailing wisdom comes from David Shaywitz, M.D., PhD, writing at The Health Care Blog (1/17/12). He questions whether it is appropriate and in the best interest of patients for doctors to be thinking about society's healthcare costs?

"The cornerstone of medicine, the most fundamental principle, in my mind, is the absolute, rock-solid belief that your doctor is your unqualified advocate and will work as hard as possible to provide you with the best medical treatment possible, as if you were a member of her own family...


Perhaps (and it pains me to say this), physicians have something to learn from our colleagues in the law.  It could be that we are better served by an adversarial system of some kind, where at least you can trust your doctor, rather than by a system in which physician’s role is to assess not only your disease but your relative value to society.

We’re not there yet, but when I read about the supposed moral imperative to be responsible stewards of the public healthcare dollar – yes, I worry.  And so should you."


I think David Shaywitz is right.

       So what does this mean for the prevailing wisdom? It may mean that the prevailing wisdom is as much about how to maximize payment under the coming ("reformed") system as it is about improving patient care. Could we be substituting a new set of flawed incentives for the old flawed incentives? As conflicts arise in the competition over the ever-shrinking pie, the players need to steer clear of false assumptions. The process of sorting out the allocation of limited dollars will be hard enough without paying for dubious improvements. 

[Image: Wish, November 22, 2009, by Jessica Tam]

Doctors' Crystal Ball Shows Trouble Ahead


       Hat tip to John Goodman's Health Policy Blog for pointing out a recent Thomson Reuters - HCPlexus survey of U.S. doctors' predictions on the effects of the Patient Protection and Affordable Care Act, a/k/a the Health Care Reform Act of 2010 ("HCRA"). Among the highlights:

1. 65% of respondents said that the quality of health care in the U.S. will deteriorate over the next five years, while only 18% thought it would improve.

2. 78% of respondents thought that health care reform will have a negative impact on physicians, while only 8% predicted  a positive effect. The majority believed that the process for physician reimbursement will become less fair to physicians.

3. 58% of respondents predicted health care reform would have a negative impact on patients, compared with 27% who said it would be positive and 15% who said its effect would be neutral.

4. 45% of all respondents indicated they did not know what an ACO is, and no category or specialty had more than 17% of respondents who were actively participating in discussions to form an ACO.

       You can find an Executive Summary of the survey and obtain the entire report on the HCPlexus website.

       Whether the majority of this survey's respondents are right or wrong remains to be seen. But there is no doubt that their prevailing mind-set is driving much of the dialogue among physicians, hospitals and other providers today. Parties on all sides of negotiations and disputes over relationships to be played out over the next five years should take note.

Successful Physicians And Healthcare Reform: Will Old Dogs Learn New Tricks?

     Last week I was fortunate to hear a presentation to a group of hospital trustees and senior management by noted healthcare consultant Jamie Orlikoff. For three hours, Jamie shared his knowledge and predictions on what healthcare reform and related developments will mean for hospitals and doctors in the near (2-5 year) future. The audience was riveted, but to say the least, his comments were unsettling.

     In a nutshell, Jamie sees change coming not so much from what the recent healthcare reform statute says, but from the economic and political forces that inspired the new law. In his view, the implementation of the law through regulatory action, and the corresponding movement of private health insurers in parallel with the federal payors, will create irresistible forces, compelling hospitals and physicians to radically alter their current modus operandi.

     The number one driver of change is the unsustainable growth in U.S. healthcare costs. Although the healthcare reform law, on its face, does almost nothing to reduce costs (and increases costs by covering many now uninsured), it sets the stage for future regulatory action that will decrease the amount of money the federal government spends on every covered person. Once everyone is covered, and private insurers are following the federal government's lead, there will be few places for hospitals and doctors to shift their costs. They will have to learn to get by with less, much less.

     Slashing reimbursement rates will be part of this process, but the primary focus will be on using economic incentives to create improved quality and outcomes. Whether through accountable care organizations ("ACOs") or value based purchasing ("VBP" - bundling payments for episodes of care), these measures will require hospitals and doctors to actively cooperate with respect to the economic consequences of their patient care decisions, and to be prepared to accept smaller slices of a smaller pie. This has been unheard of in most places outside of the Mayo Clinic and Geisinger Health System. That is about to change. According to Jamie Orlikoff, many hospitals around the country already have doctors on their medical staffs banging on their doors, asking to be acquired and "integrated" into a larger network of providers. I don't disagree that when the money starts to shrink, many physicians will seek safety in numbers and a bigger tent.

     Where I disagreed with Jamie Orlikoff was on the inevitability of this process as it concerns well established, successful physicians. In my mind, physicians who have been in practice for 20-25 years, who have a loyal patient following, strong referral sources and a sterling reputation, will look at ACOs and VBP and ask themselves, what does this mean for me? Many of such physicians will have the ability to retire in the next 5 to 15 years. What will be their incentive to embrace changes that, when all is said and done, translate into lower incomes than they now enjoy?

     Jamie Orlikoff would argue that such physicians will have no choice - they must either get on the bus or get run over. I'm not so sure. No matter what the government does, whichever physicians are thought of as the best in their areas will not change, and patients will still want to see them. Patients will pay out of pocket, complain to their insurers and call their Congressmen if they are denied that opportunity. This may not last forever, but it may last for enough of that 5-15 year window to make successful physicians less than eager to jump on the reform bandwagon. In addition, such physicians may easily overestimate how long they will be protected by this phenomenon.

     What does this mean for those attempting to construct the relationships and systems that healthcare reform seems to require?  It means they need to identify how many highly successful physicians they have to work with, and how many of those "old dogs" will learn new tricks.


     For some hospitals/health systems, there simply may be too many old dogs that will not learn new tricks, at least not in their current environment. Jamie Orlikoff advised that such hospitals/systems, regardless of their current financial performance, would be wise to seek a merger or affiliation with a larger system, thus gaining the ability to better absorb or manage physicians unwilling to accept the changes required by healthcare reform. For those with fewer such old dogs, or for the hospitals/systems with no ability or willingness to merge, the challenge will be formidable.

     Hospitals/health systems should resist an extreme response to their old dogs in either direction, i.e., neither write them off nor capitulate to their every demand. Integrating successful physicians into the relationships and systems mandated by healthcare reform will require understanding their view of the world, a commitment to collaboration and skillful conflict resolution.

[Image: Gloria Swanson and Teddy the dog, from the film "Teddy At The Throttle," 1916]

What's A Doctor Worth To A Hospital?

     In the ongoing symbiotic relationship between hospitals and members of their medical staffs, it is understood that the physicians generate hospital revenue by admitting their patients and ordering tests and procedures. But exactly how much is any doctor "worth" in this sense? Thanks to the HealthLaw Prof Blog, I saw that James A. White recently covered this issue in the Wall Street Journal Health Blog. Citing to a study of 114 U.S.hospitals by physician recruiters Merritt Hawkins, the WSJ produced a chart listing average hospital net inpatient and outpatient dollars derived from referrals, tests and procedures done in the hospital.

     The chart showed average hospital revenue ranging from a low of $696,888 (from nephrology) to a high of $2,815,650 (for neurosurgery). The average for internal medicine was $1,678,341. The article doesn't talk about the hospitals' costs to provide the services that resulted in the hospital revenue described. Although some costs are evenly distributed among all patients, some are not.

     Any hospital administrator will tell you that not many days go by without some physician on staff reminding the administrator of how much his or her presence is "worth" to the hospital. Unlike most other fields of endeavor, physicians by law cannot be paid by the hospital for what they are "worth" in business generation. But that doesn't mean physicians will not expect to be compensated for that value in some way. Nor does it mean that hospitals can afford to be oblivious to this calculation of value.

     Whether in negotiating employment compensation, the structure of a joint venture, or the terms of a services agreement, a hospital should know what the physician across the table is worth in hospital revenue. Although this is not the only value of the physician to be assessed, and the hospital cannot base its offer on the value of physician business generation, the potential loss or absence of that hospital business is certainly a major factor in calculating what mediators call the hospital's WATNA (worst alternative to a negotiated agreement).

     This analysis is complicated, and may yield unexpected results. But failing to do it is like ignoring the size of the pot on the table. You will end up paying too much, or folding on deals the hospital can't afford to lose. 

[Image: Hole cards in a game of Texas hold'em, by Thomas van de Weerd, September 2, 2006]

Medicaid Cuts Will Strain Hospital - Physician Relations

     Kevin Sack wrote earlier this week in The New York Times about the effect Medicaid cuts are having on patients throughout the country. The focus of that article was the hardship resulting from the decision by more and more doctors to simply stop participating in the Medicaid program rather than accept payment rates that assure an operating loss. As states look for ways to balance their budgets, further cuts in Medicaid appear inevitable, even as the sluggish economy forces more people onto Medicaid rolls.

     Hospitals depend on physician participation in Medicaid in a variety of ways:

- Physicians who see Medicaid patients in their offices keep those patients from using the Hospitals' emergency rooms for non-emergent care.

- Hospitals required by law to provide care to all patients without regard to their financial means must have a medical staff that is prepared to provide the full range of professional services to all, including Medicaid patients.

- Hospitals have "on call" and "coverage" requirements that mandate physician service, as needed, to all patients who enter the hospital without a prior physician relationship.

- Hospitals routinely have numerous exclusive contracts with particular physician groups to provide all of the services within a specialty (e.g., radiology, anethesiology, pathology) as required by all hospital patients. These contracts typically require the physicians' participation in the Medicaid program.

- Hospitals frequently develop outpatient and ancillary facilities separate from the main hospital campus to reach more profitable segments of the healthcare market (e.g. surgicenters, ambulatory care centers, diagnostic imaging centers). These efforts involve physican participation, whether as co-owners, tenants or professional service providers. The hospitals involved frequently mandate Medicaid participation of such facilities to satisfy regulatory requirements, tax exemption criteria or the hospitals' mission statements.

When Medicaid payment rates sink low enough, and too many physicians want out, something will have to give.


     Physicians will argue that they cannot afford to give their services away, at least not to the percentage of patients that may be included in expanded Medicaid enrollments. Hospitals will argue that patient service is a shared mission, and the hospitals' rates of payment from Medicaid are equally miserable. Physicians will counter that the mandates driving the hospitals (as noted above) are hospital mandates, for which the hospitals must bear the cost. Hospitals will counter that they have no source of funds from which to pay those costs.

     This is where mediation can help. Hospitals and physicians facing this problem need to have an ongoing relationship after the current dispute is resolved. A heavy handed, litigation driven, "win or lose" approach to solving the problem is inconsistent with that need. It also ignores the opportunity to identify and build upon common interests, including interests separate from the Medicaid problem. Finally, a neutral with substantive knowledge of the industry can help hospitals and physicians identify solutions that are both financially feasible and legally sound.

[Image: Delancey Street, Bowery, Manhattan, New York City, September 13, 2005]

Pay Doctors Less And They Will Work Less

     Really?  A recent article in The Washington Post by Carla K. Johnson points out that doctors have steadily cut their work hours over the last decade, largely in response to a decline in pay for doctors' services.

"It's not that doctors are terrible slackers. Average hours dropped from about 55 to 51 hours per week from 1996 to 2008, according to the analysis, appearing in Wednesday's Journal of the American Medical Association.

That's the equivalent of losing 36,000 doctors in a decade, according to the researchers."

     Is it just me, or does this headline belong with that group of newspaper clippings routinely deadpanned by Jay Leno, e.g.: "Obesity Study Blames Overeating," or "Police Raid Gun Shop - Find Weapons."

     I suspect the same headline would occur if the circumstances applied to lawyers, teachers, auto mechanics, construction workers or anyone else used to being paid for what they do. As our leaders in Washington debate the various ways to pay doctors even less, keep this headline in mind when planning your next negotiation. 


     [Image: "A Very Difficult Case," c. 1905]

Changes In Scope Of Healthcare Practice = Conflict, Too

     Earlier this week I wrote about the inevitability of conflict arising out of the leading ideas behind healthcare reform.  Restructuring healthcare payment systems to reward efficiency and quality rather than volume will only be effective if they result in a decrease in overall spending. With that "smaller pie" will come disputes over how to slice the pie. But efforts to contain healthcare costs will not be limited to elegant reform measures based on lofty principles. Especially when government payers are involved, healthcare cost containment may take a more direct approach.

     Witness the "turf war" between anesthesiologists and Certified Registered Nurse Anesthetists ("CRNAs") going on in California. As reported by James A. White in The Wall Street Journal Health Blog, Governor Arnold Schwarzenegger last year exercised an option under the Medicare program to permit CRNAs in California to administer anesthesia without a supervising anesthesiologist. The California Medical Association and the California Society of Anesthesiologists filed a lawsuit to block Schwarzenneger's decision. Prior to California's decision, 14 other states had opted out of the physician supervision requirement.

     Healthcare cost containment by government payers can occur through licensing and enforcement proceedings that directly or indirectly change the scope of practice permitted in a given healthcare sector.  A health care adviser to California's Governor told Anesthesiology News that "the purpose of the opt-out decision was to reduce pressures on and increase access to services at small and rural hospitals." Hmm. The WSJ Health Blog notes that California has the largest number of anesthesiologists in the U. S. at 5,400. Leaving aside the debate on patient safety, it is not hard to understand that paying unsupervised CRNAs costs less than paying for physician supervision.

     Once states take action to change a permissible scope of practice, the action shifts to how that change will be applied by hospitals, physicians and third party payers. The California rule change did not mandate the use of unsupervised CRNAs. But when payers demand lower prices and hospitals compete for patients, possible cost reductions have a way of becoming necessary cost reductions. That's when the fun begins.

[Image: Turf War Graffiti at Glanmoelyn, Llanrug, United Kingdom, by Eric Jones, August 12, 2006]

Healthcare Reform and Inevitable Conflict: Smaller Pie Means Smaller Slices

     With all the media coverage of healthcare reform and its political ramifications, its easy to get caught up in the debate. Notwithstanding the recent setbacks, there will be some kind of reform in the not too distant future, if only because the sources of healthcare payment cannot keep up with the costs of providing care. Most healthcare economists agree that real reform will only come when the financial incentives of the current system are altered to reward quality and efficiency rather than volume

     A concept frequently put forth to address this objective is the "accountable care organization" or "ACO" (any reputable idea in healthcare must be reducible to a three letter acronym). Essentially, ACOs are associations of healthcare providers (typically, doctors and hospitals) that share responsibility for the coordinated care provided to a pool of common patients. ACOs can share clinical information and operate with some degree of financial integration. The providers in the ACO are then jointly "accountable" to the third party payers who fund the care provided to their beneficiaries by the ACO. (See the recent post in the Healthcare Economist explaining ACOs and some of the key characteristics of various ACO models.)

     Another concept aimed at the same objective is "value based purchasing" or "VBP."  Under VBP, the current system of Medicare payments to physicians (based on a per task menu of fees) would be converted to one based on efficiency and quality.  In order to assess a physician's efficiency and quality, the services provided to any patient would have to be grouped with all services within the same "episode of care." As noted in another post at the Healthcare Economist, this process of grouping carries with it a number of unanswered questions.

     Sooner or later, the use of ACOs and VBP in some form will become a reality.  There is no other politically viable approach on the horizon to reducing healthcare costs. But that will be only the beginning of a wave of conflict within the world of healthcare providers and third party payers.  ACOs, VBP and any other three letter acronym to come will only reduce healthcare costs by yielding a result by which the total dollars paid to doctors and hospitals for providing care to a group of patients is reduced. Otherwise, why bother? When the pie gets smaller, everyone's piece will get smaller, too. Those who provide the highest quality, most efficient services may get a larger piece, but that will only make everyone else's piece even smaller.


     Most doctors and hospitals do not believe they are overpaid under the current regime. Many have  experienced decreased net income over recent years. All will enter the new arena of ACOs and VBP firmly holding the "bottom line" position that they must at least maintain their financial status quo. The convergence of so many irreconcilable bottom lines will create conflicts that play out in a variety of scenarios. Who will lead the ACO? Who will be allowed in or kept out? Who will decide the internal compensation model, and what will it be? What effect will the ACO have on existing hospital-physician relationships? On existing medical practice agreements? How far will ACOs go to create, preserve and assert their control over patients in dealing with third party payers? How much of the benefit of their "efficiency" will providers share with third party payers?

 [Image: Thanksgiving pie aboard U.S. naval ship in the Persian Gulf, by Photographers' Mate Airman Rome J. Toledo, November 25, 2004]

Cardozo To Host Conflict At Work Symposium

[Image: Anselm Feuerbach's painting of a scene from Plato's Symposium, 1869.]

     The Cardozo School of Law Journal of Conflict Resolution will hold its 11th annual symposium in New York City on Thursday, November 5, 2009, entitled "Conflict Resolution at Work, ADR in the Private and Public Sectors."  The full day program will include panels on the use of ADR in real estate, federal government and healthcare.  I will be part of the panel on healthcare along with moderator Ellen Waldman, Jerry P. Roscoe, Chris Stern Hyman and Joan Ilivicky,  The symposium is free, and includes breakfast, a reception and CLE credits! If you attend, please stop by and say hello.

Will Healthcare Reform Spread The Wealth To Primary Care?



          Yesterday's Wall Street Journal Health Blog had a post by Jacob Goldstein on the potential struggle brewing between primary care physicians and specialist physicians over the need to free up more money for primary care -  a widely accepted element of necessary healthcare reform.  Earlier that day, the American College of Physicians called for more federal funding for primary care, not through "budget neutral" adjustments in the Medicare physician fee schedule (i.e., by reducing payments to specialists), but simply by paying more upfront for primary care.  The WSJ Health Blog interpreted the primary care position paper this way:

"Congress could try to pay primary care docs more by cutting Medicare payments to some of the rich specialists.  But the rich specialists would fight that tooth and nail, and nothing would ever get done."

          Reading this, I couldn't help but recall a time in my former life when I heard a newly proposed law firm partnership compensation system described by one of its proponents this way: "It will work well because some partners will make more, and everyone else will make about the same."  Regrettably, law firm profits are a zero sum game.  There may be enough "stimulus" mania (i.e. printing of money) in Washington these days to save the primary care docs and the specialists from a zero sum fate, but probably not for very long.

          More than two months ago, this primary v. specialist conflict was predicted and thoroughly dissected by Maggie Mahar and Niko Karvounis in The Health Care Blog, where they dubbed it the "Spread the Wealth Controversy."  In the end, they concluded that money alone would not be the answer to the problem:

"Ultimately, we will probably need to grapple with primary care as a cultural issue within the medical community....in medical schools, students are sometimes looked down upon for choosing to specialize in cognitive care.  Further, research has shown that the medical school curriculum actually drains students of empathy, which may contribute to de-valuing communicative, interpersonal care....The bottom line is that we need to take a multi-faceted approach to the primary care crisis."

          For a more provacative treatment of the need for systemic reform of primary care, see "Mythology and Healthcare Reform" by Monte Uyemura, M.D., also in The Health Care Blog.  Better yet, just subscribe to The Health Care Blog - its a great read on all matters concerning the health care system.

          I have friends and colleagues on both sides of this primary v. specialist conflict.  Most of them don't see it as their conflict at all, and find it unpleasant to talk about.  Unfortunately, it won't likely go away.

[Image: "Artwork" with 20 Dollar bills]

Welcome Betsy Ryan's Healthcare Matters Blog!



       I recently learned that Betsy Ryan, the President and CEO of the New Jersey Hospital Association, has started a blog called "Healthcare Matters."  It appears as part of the New Jersey Hospital Association's public website

"Healthcare Matters eamines the many issues confronting New Jersey's hospitals and their patients. Readers are encouraged to join the discussion, because healthcare matters- to all of us."

       For those not familiar with Betsy Ryan, she was recently appointed to the NJHA's top management post after years of service as the organization's Chief Operating Officer and General Counsel.  She has extensive experience in the legislative, regulatory, financial and operational issues facing New Jersey's hospitals.  As a result, her blog is well positioned to address a subject not currently covered directly in the blogosphere.

       So far, Healthcare Matters has captured some of Betsy's personal perspectives on current events affecting New Jersey's hospitals.  She has already attracted some lively discussion.  Subscription by RSS is easily done, and I encourage all to join in and expand this dialogue.

[Image: welcome kitty, by Portraitlady4306, August 27, 2007] 

AHLA Offers Practical Toolkit For Managing Healthcare Conflicts

     Before you head off for the long Thanksgiving weekend, consider signing up for a teleconference to be held next Tuesday that you might otherwise miss in the post holiday crush.  The American Health Lawyers Association ("AHLA"), through its ADR Task Force, is offering "A Practical Toolkit for Managing Healthcare Conflict" from 3:00 to 4:00 p.m. Eastern Time on December 2, 2008.  You can read the full description of the program and sign up on the AHLA's website.  It is open to AHLA members and non-members.

      Presumably, the teleconference will be based on the "Practical Toolkit for Managing Healthcare Conflict" just published by the AHLA, which is available as a PDF on the AHLA website.  This document is a good summary of the need for conflict management in the healthcare (particularly hospital) setting, and provides a framework for hospital management to approach conflict management comprehensively.  It also addresses the specific requirements for internal hospital conflict resolution processes mandated by the Joint Commission.


     No doubt the current economic crisis affecting hospitals in New Jersey and throughout the country  will only make conflict more prevalent and important to manage.  It will be interesting to see whether some of the suggestions made in the AHLA's toolkit, which will carry a new and significant price tag, will gain traction.  I believe what they say about "an ounce of prevention" applies here, but those with the checkbooks may need more convincing. 

     Joining in to hear this program would be a step in the right direction.


[Image: A toolbox, by Per Erik Standberg, May 13, 2006] 

New Jersey Hospital Seizes An Opportunity To Maintain Its Mission

     I've written here previously about the need for all constituents at a financially challenged hospital to collaborate towards a mutually positive solution, and to seize the moment of opportunity that arises once it is clear that the status quo cannot be sustained.  Waiting for a financially strapped state government like New Jersey's for help may result in others seizing control, but will not likely fix the underlying problems.

     It was great to read last week that Raritan Bay Medical Center, a two hospital system with an older and larger facility in Perth Amboy and a newer, smaller complex in suburban Old Bridge, was planning to meet with potential buyers of the Old Bridge facility to secure a cash infusion for the struggling Perth Amboy hospital.  I was born in Perth Amboy Hospital in 1953.  No, this is not me below, but the scene probably looked much like this back then.

     Writing in the Star Ledger online edition, Tom Haydon reports that employees at the two hospitals were informed of the possible sale last month, and that local and state political figures were fully behind the move.  The sale would consolidate Raritan Bay's operations at the Perth Amboy facility, where Raritan Bay serves a large number of uninsured patients, while permitting the Old Bridge facility to continue operating with minimal disruption to its employees and community. 

     It remains to be seen whether the proposed sale will occur and have a lasting corrective effect on Raritan Bay's financial challenges.  However, it is refreshing and encouraging to see the governing board and management of a hospital having the foresight and will to act, while they still have options, to remain true to their view of their hospital's mission.

[Image: Two nurses with baby in nursery, Toronto, Ontario, circa 1955, by Canadian Nurses Assoc.]

5th Circuit's Poliner Decision Boosts HCQIA Immunity

 [Image: U.S. Hygiene Laboratory photo of Schick test, a measure of immunity from diphtheria, 1915]

          It may be the weather, the economy, or the mounting pressure on hospitals and physicians to "compete" with each other like never before, but lately I have noticed a sharp increase in matters presented to me involving "professional review activities" by hospitals against physicians on their medical staffs.  These disputes come in all shapes and sizes, but always require reference to the hospital's medical staff bylaws and applicable law. 

          In particular, the federal Health Care Quality Improvement Act of 1986 ("HCQIA") provides for "safe harbor" procedures to be followed in the course of any professional review activity, compliance with which is a precondition to the legal immunities offered by the Act.  The HCQIA's requirements have become the industry standard, and often shape (or at least must be read together with) the provisions of a hospital's medical staff bylaws concerning the due process rights of affected practitioners.

          In 2004, a jury in the Northern District of Texas awarded a physician $366 million in damages against a hospital and members of its medical staff for action taken by them to suspend the plaintiff physician's medical staff privileges.  The award in that case, Poliner v. Texas Health Systems, et al, sent shivers through hospitals throughout the country because the trial court  permitted the damages award to stand (albeit substantially reduced in amount on remittitur), notwithstanding the defendants' claim of immunity under the HCQIA.  This week, the Fifth Circuit Court of Appeals issued a decision in the defendants' appeal on this issue, and reversed the judgment of the District Court.

          The Court's opinion focused on whether the defendants in Poliner had adhered to the four requirements for immunity under the HCQIA:

1 - Were their actions taken in the reasonable belief that they furthered quality health care?

2-  Was there a reasonable effort to obtain the facts?

3-  Were adequate notice and hearing procedures afforded to the affected physician?

4-  Did they reasonably believe that their adverse action was warranted by the facts known?

          There was no dispute that these were the requirements for immunity under the HCQIA.   The  question faced by the  Fifth Circuit was whether the District Court had interpreted these requirements correctly in applying them to the defendants in Poliner.  In several important respects, the Fifth Circuit found that the District Court had erred.

          Of most importance  to hospitals and counsel for physicians on both sides of these situations, the Fifth Circuit held:

 - The HCQIA's reasonableness requirements were intended to create an objective standard of performance rather than a subjective good faith standard.

- The Court's review of the reasonableness of the defendants' decisions must be based on the information known to them at the time, and not what might be later shown to be true by experts or otherwise.

- Immunity does not require the defendants to have been correct or "right" in their findings, only that their findings were objectively reasonable under the facts available at the time.

- Plaintiff's allegations of anti-competitive motives and evil intent are of no consequence to the immunity offered by the HCQIA if the defendants' actions are objectively reasonable.

- Immunity from money damages under the HCQIA does not require compliance with the hospital's medical staff bylaws, as long the four requirements of the HCQIA set forth above have been met.

          This decision will greatly affect the resolution of conflicts involving professional review action, whether during the hospital-medical staff proceedings or in subsequent litigation.  The trial court's decision created a perception of risk in many professional review scenarios that expanded the range of potential outcomes "on the table" during any effort to resolve these matters.  Under the Fifth Circuit's decision, that range has been shrunk.

          Aside from its  value as direct precedent, the decision is very clear, well reasoned and practical in its approach, and I wager it will be widely followed.  Affected physicians will now get far less impact from suggestions that "the review panel was out to get me," "my expert knows more about this than you do," or  "the hospital didn't follow its bylaws."

           Poliner appears to have put the balance of negotiating power back to where it was intended by the HCQIA.  It clearly elevates considerations of patient safety over the right of an affected physician to seek money damages.  It leaves unchanged the affected physician's right to seek remedies other than money damages (e.g., to enforce rights under the medical staff bylaws), and holds hospitals and medical staffs to a reasonable standard of conduct that they can realistically implement.  It warrants their collective sigh of relief.

(Hat tip to the Horty Springer Health Law Express (join here) for being the first to bring this decision to my attention.)

Healthcare Is Not Recession Proof

          I just read an excellent post by Jeff Goldsmith in The Health Care Blog entitled "Health care is not recession proof." In it, he debunks the "conventional wisdom" that health care is "recession proof" because "people get sick regardless of economic cycles, and the publicly funded safety net programs insure that people who need care get it."

          I will not attempt to restate his entire argument (or some of the interesting comments of others), but I can't help but notice the coincidence of his central theory with current events here in New Jersey. As he explains it,

          "[t]he reality is that health care has never been recession proof. It is simply that the system is so immense that lag effects in changed health care payment conceal the cyclicality. Recessions shrink tax revenue growth, and since Medicare and Medicaid are the balancing items in state and federal budgets, Medicaid and Medicare constrict payments a predictable 18-24 months after revenue problems surface."

[Image: Maximum recession of tsunami waters at Kata Noi Beach, Phuket, Thailand, before the third, and strongest tsunami wave, by User: PHG, December 26, 2004 ]
          Goldsmith's post appeared shortly before the New Jersey legislature's apparent resolution of the State's July 1 fiscal year budget, in which New Jersey's hospitals collectively will receive about $111 million less in charity care funding to cover their statutorily mandated service to all patients regardless of ability to pay, a mandate that already left hospitals well short of covering their costs at the former funding level. Thus, in New Jersey, hospitals get not only the cyclical effect of lower Medicare and Medicaid payments described by Goldsmith, but a decrease in charity care payments that is similarly driven by the State's budgetary shortfalls unrelated to healthcare.

          As Goldsmith says to the healthcare industry in closing, "Welcome to the real world!"  Better yet, for those running this state's beleaguered hospitals, "Welcome to New Jersey!"

Special Issue Of New Jersey Lawyer Covers Healthcare Law

          The current issue of in Re: Magazine, the special supplement to the weekly newspaper, New Jersey Lawyer, is dedicated to healthcare law and is online now.


          In addition to an article by yours truly entitled Alternative Dispute Resolution In The Healthcare Industry, topics covered include:

- Nuances Of Purchasing  A Medical Practice, by Peter A. Greenbaum;

- The Next Wave Of Healthcare Fraud Enforcement In New Jersey, by Mark S. Olinsky and Gary W. Herschman;

- Answering Malpractice Insurance Questionnaires, by Christopher R. Barbrack;

- Medicaid Beneficiaries' Rights Not To be Evicted From Nursing Homes, by William P. Isele; and,

- New IRS Form 990 And Transparency For Nonprofit Boards, by Todd C. Brower and Isai Senthil.

[Image: Newspaper Rock, by Jon Sullivan, February 15, 2004]

Use Mediators, Not Juries, To Resolve Medical Staff Disputes

   [Image: Engraving of Gilbert  and Sullivan's Trial by Jury, from Illustrated Sporting and Dramatic News, by D. H. Friston, May 1, 1875.]

          Recently I wrote about the risk of an "intuitive decision" associated with placing the resolution of a dispute in the hands of a judge.  As I was writing that post, I came across reports of a case recently decided in West Virginia that should get the attention of every hospital involved in a medical staff dispute that could end up before a jury.  As mentioned in West Virginia Business Litigation by Jeffrey V. Mehalic, Hamrick v. Charleston Area Medical Center ("CAMC") was a suit filed by a surgeon against a West Virginia hospital alleging misconduct and damage to his reputation resulting from the revocation of his medical staff privileges.  The case was covered by Eric Eyre of the Charleston Gazette at the start and end of the trial.

          CAMC revoked Dr. Hamrick's privileges when he failed to obtain a required medical malpractice insurance policy, which Dr. Hamrick insisted was not necessary as long as he maintained an adequate self-insurance fund.  That issue led to separate proceedings about the  adequacy of physician self-insurance under West Virginia law, in which Dr. Hamrick prevailed, and ultimately inspired state legislation permitting physicians to rely upon self-insurance.  In the meantime, Dr. Hamrick pursued his suit against CAMC for damages and immediately obtained an injunction reinstating his privileges, thus permitting him to continue in practice at CAMC during the litigation.

          So, notwithstanding that Dr. Hamrick had established his right to self-insure in court, that the West Virginia legislature had enacted a statute permitting self-insurance of the kind maintained by Dr. Hamrick, and that Dr. Hamrick's practice at CAMC was never interrupted, what did the jury do at the conclusion of the trial?  They returned a $25 million verdict for Dr. Hamrick.

          I know only what I read in the press about this case, but it appears some facts were brought out at trial that caused the jury to conclude that CAMC management had been less than forthright in their handling of the insurance dispute with Dr. Hamrick.  Charleston attorney Scott Segal, who represented Dr. Hamrick in the case, described some of these facts in a letter to the editor of the Charleston Gazette.  On the other hand, counsel for CAMC, Bob O'Neill, told the jury that "CAMC had acted reasonably and in good faith...they bent over backward," efforts which apparently included an offer to purchase a temporary commercial insurance plan for Dr. Hamrick until the matter was resolved.

          Perhaps the best insight into the jury's decision comes from Karen Miller, Dr. Hamrick's sister and lawyer, who was quoted after the verdict in the Charleston Gazette as saying, "We need new administrators over there, and we need a new Board of Trustees.  That's what the jury is telling the community, just like the doctor's [sic] have been."  Apparently there has been some dissatisfaction within the community served by CAMC in recent years concerning the performance of its leadership.  But was it the job of the jury in this case to address that dissatisfaction, or to take action that would lead to a change in CAMC's leadership? No matter what facts came out at trial, it is difficult to see how Dr. Hamrick could have established anything more than nominal damages, let alone $5 million in compensatory damages.  The $20 million punitive damages award seems to have been aimed solely at getting rid of CAMC's Board and management - even though the community will ultimately bear this cost.  Perhaps an appeal will turn things around, but I understand that West Virgina offers no appeal of right, so the state's Supreme Court must first agree to take the case.

          What's the moral of the story?  Hospitals locked in a dispute with a physician that may end up being decided by a jury must take into account the uncertainty of the jury's reasoning process, and the certainty that the jury will not be made up of hospital administrators or health care lawyers.  Even when a hospital is sure it is  "in the right", it may end up with a very bad result.  My guess is the case didn't settle because CAMC believed (1) that it was "right," and (2) that Dr. Hamrick's last settlement demand was higher than CAMC's risk of a bad jury verdict.  Whether CAMC was "right" or "wrong" didn't matter.  Getting hospitals to understand this, and helping them to correctly assess the  competing risks, are the mediator's bread and butter.

Hospitals Must Develop Sustainable ER On-Call Programs (Did you want to keep that finger?)

          [Image: Hospital Corpsman sutures a patient's hand.  Photo by Dexter Roberts, May 31, 2005]

          I recently wrote here that the Report of the New Jersey Commission On Rationalizing Health Care Resources (the "Reinhardt Commission Report") suggested three areas for collaboration between hospitals and their medical staffs that would be challenging, but worthy of pursuit.  Among them, the need to develop a mutually acceptable and enforceable program of Emergency Department coverage, jumped off the pages of the AHLA Health and Life Sciences Law Daily (members only) today in the form of an article by Ann Wlazelek in The Morning Call.  The story, "Doctors' stance leaves hospital shorthanded," tells the tale of a failed negotiation between management at Lehigh Valley Hospital and a group of specially trained hand surgeons to continue the surgeons' on-call coverage at the Hospital's Cedar Crest emergency room in Allentown, Pennsylvania.
          The Reinhardt Commission Report  (at pages  125-126) offers a concise explanation of the problem: hospitals by law must provide around the clock care in their emergency departments that includes a variety of specialized physicians' services, while the obligation of members of their medical staffs to provide those services is limited, unclear and difficult to enforce.  Most of the potential fixes for this problem suggested by the Report are outside the power of any one hospital to accomplish (e.g., standardized regulatory mandates for physician coverage,  increased Medicaid payments to physicians, regional coordination of services into Centers of Excellence).  The clear message in this portion of the Report is that each hospital faces unique circumstances, and must find its own way to solve the on-call problem.
          I don't know anything about the situation of the Lehigh Vally Hospital hand surgeons other than what I read in The Morning Call.   What I can tell is that each of the parties has adopted and stated a position that it will not relinquish.  The Hospital's position is that it must be able to determine the nature and scope of the services it will offer in its emergency department,  and that members of the Hospital's medical staff must provide all necessary on-call services as a condition of their staff membership. The hand surgeons' position is that they should not have to provide on-call services to patients from a great distance away who could have been treated by other qualified surgeons in their own area.
          Although these positions appear to be irreconcilable, I wonder if the parties have explored and shared their respective interests.  The Hospital's interests might include:
1- securing necessary medical expertise in the emergency department 24/7/365;
2- retaining the ability to determine the nature and scope of the services it will offer;
3- maintaining a medical staff rule for on-call coverage that is fair, reasonable and perceived as such; and
4- operating cost effectively. 
          The interests of the hand surgeons might include:
1- limiting their on-call coverage to patients who truly require their expertise; 
2- preserving the scheduling integrity of their regular office and surgical practice;  and
3- defining an on-call coverage obligation that is equitable when compared with other members of the medical staff. 
          I doubt that either party would object to the other's statement or attainment of their respective interests.  Might it then be possible for all or most of these interests to be accommodated within a comprehensive solution to the parties' on-call coverage problem?  I think it would.  I suspect this has not happened because the parties have not attempted to do it.  Instead, the hand surgeons are off the medical staff and the Hospital is about to spend a lot of money to recruit a hand surgeon who cannot possibly cover the emergency department 24/7/365.  Everybody loses.
          Hospitals in New Jersey and elsewhere can reach a better result if they work with their medical staffs to fashion solutions that address not their stated positions on this issue, but their respective, legitimate interests.  A mediated process of collaboration can create opportunities that otherwise will be missed.

Cordero v. Christ Hospital Opens A Can Of Worms

     A decision by the Appellate Division of the Superior Court of New Jersey last week will raise more questions than it answered in malpractice cases involving hospital based physicians.  In Cordero v. Christ Hospital, covered by the New Jersey Lawyer here, the Court considered whether a Hospital could be held vicariously liable for the malpractice of a member of the anesthesiology group having an independent contractor relationship with that Hospital. The Court held that:

          "...when a hospital provides a doctor for a patient and the totality of the circumstances created by the hospital's action and inaction would lead a patient to reasonably believe the doctor's care is rendered in behalf of the hospital, the hospital has held out that doctor as its agent.  We also hold that when a hospital patient accepts a doctor's care under such circumstances, the patient's acceptance in the reasonable belief the doctor is rendering treatment in behalf of the hospital may be presumed unless rebutted."

     In delineating "the relevant circumstances that should be considered in their totality in determining whether the hospital's conduct would lead a patient in the same situation to reasonably believe that the doctor acts on the hospital's behalf," the Court pointed to the following:

  • whether the hospital supplied the doctor
  • whether the medical care provided is integral to the medical treatment received in the hospital
  • any notice of the doctor's independence from the hospital
  • the patient's opportunity to reject the care or select a different doctor
  • the patient's contacts with the doctor before the incident in question, and
  • any special knowledge of the doctor's contractual arrangement with the hospital

     Applying these criteria to most hospital based physicians who provide services as independent contractors under an exclusive group contract (e.g., anesthesiologists, radiologists, pathologists, emergency medicine), the predominant model nationwide, few would escape characterization as acting "in behalf of the hospital."

     The Court's opinion disregards the reality of current hospital operations.  For reasons of efficiency and patient safety, hospitals have established exclusive independent contractor relationships with groups of specialists in key areas that are integral to the effective operation of the hospital.  Such arrangements have been approved consistently by state and federal courts in the context of unfair competition and antitrust lawsuits.  Without such exclusive arrangements, key services would be provided by a disjointed and unreliable collection of separate physicians - a result that would no doubt lead to another decision holding a hospital liable for failure to implement a safer system! 

     The Court's opinion also falsely assumes that hospitalized patients might make a different decision (i.e., that they might decline treatment) if they understood that hospital based physicians were "independent" from the hospital.  Clearly, they would not, and there would be no reason for them to do so.  The idea that patients accept the services of contracted hospital based physicians only because they believe the physicians are "provided in behalf of the hospital" is a fiction. 

     Assuming hospitals will not abandon the current model of exclusive contracts with hospital based groups, compliance with the Court's opinion will be difficult.  However, unless and until this opinion is reversed, hospitals in New Jersey would be well advised to implement measures which at least nominally address some of the factors identified by the Court.  Admission forms should be reviewed to emphasize the independence of all non-employee physicians, including the hospital based specialists (and disclaiming hospital liability for their acts); patients also could receive a standard notice whenever they are likely to utilize a hospital based physician advising the patient of the independent contractor relationship.  All of this will add expense and paperwork, and will likely have no effect on the patients' decisions or their care, but may save the hospital from significant liability exposure.

     The settlement of malpractice cases in New Jersey involving hospital based physicians will now be more difficult.  Greater risk has been created that hospitals will be held responsible for the acts of heretofore "independent" physicians.  All of the elements identified by the Court in Cordero v. Christ Hospital will take on new significance.  Hospital statutory immunities and insurance coverage issues undoubtedly will require clarification in this regard as well.  The mediator's job just got more interesting. 


Reinhardt Commission Report Will Require Unprecedented Hospital - Physician Collaboration

          [Image: US Navy Commander Robert S. Kerno, Commanding Officer, USS Yorktown, points out some sights to the President of Venezuela, Hugo Chavez, on a tour of the ship during the 43rd annual UNITAS exercise, March 2, 2002.]

          I wrote here last week that the recently released Report of the New Jersey Commission On Rationalizing Health Care Resources (the "Reinhardt Commission") contained a cogent analysis of the unique relationship between hospitals and physicians.  The Report makes a series of recommendations for the improvement of hospital finances, operating efficiency and patient care that are worthy of pursuit.  However, underlying several of those key recommendations is the need for collaboration between hospitals and the members of their medical staffs - collaboration of a kind rarely seen before now.
          In posts to follow, I will focus on what I see as three key areas in which any hospital and its medical staff can translate the Commission's recommendations into concrete results: 1- establishing joint hospital-physician accountability for adherence to evidence based practice guidelines; 2- developing a mutually acceptable and enforceable program of Emergency Department coverage; and 3- creating a feasible plan to improve the efficient use of hospital resources through changes in scheduling, deployment of professional resources, staffing of intensive care services and management of the continuum of care.
          Before any of these tasks can be addressed successfully, hospitals must decide that these are goals worthy of a significant effort.  Such an effort will likely require formation of a special Board level committee, with management staff, to be charged with development of a plan and the task of integrating the input of the medical staff.  That process of integration will vary from hospital to hospital based on the existing relationship and history, but will require careful attention in every case. 
          Although in most instances the hospital's pursuit of these goals will not immediately place it in a "conflict" or "dispute" with its medical staff, the potential for that result is high.  Moreover, the nature of the issues that must be placed on the agenda can create perceptions and reactions that, once formed, are difficult to undo.  The involvement of a neutral, third party in the design and facilitation of the collaboration process can often obviate or ameliorate these problems.  Agreement between a hospital and its medical staff on the selection of such a neutral may well be the best first step of their journey.

Reinhardt Commission Report: New Jersey Hospitals Need To Focus On Blocking and Tackling

     [Image: 2005 Texas Longhorn football team playing the University of Colorado, by Johntex 2005]

          The New Jersey Commission On Rationalizing Health Care Resources (a/k/a the "Reinhardt Commission") issued its long awaited Final Report 2008 last week, and was immediately met with a strong response from the New Jersey Hospital Association. In a press release, and more thoroughly in an "Initial Response" distributed to its members, the NJHA praised the Commission's Report "for effort" but found "it falls short in addressing the most fundamental problem confronting our state's hospitals: inadequate reimbursement, especially from governmental payers. The Commission's recommendations provide some steps for stopgap or incremental relief, but New Jersey's healthcare crisis is beyond the point of incremental action."
           It is hard to argue with the NJHA's point that  the reimbursement to its member hospitals by governmental payers (Medicare, Medicaid and Charity Care) is woefully less than the cost of providing that care, and that this problem is at the root of the system-wide financial crisis in the state. Perhaps the Reinhardt Commission's Report could have said this more clearly, or more forcefully.
          But I did not read the rest of the Report to suggest only "some steps for stopgap or incremental relief".  Instead, I think the Report took a realistic approach to solving the big problems by recommending a variety of significant but generally feasible changes in the way hospitals do business. Yes, hospitals need, deserve and in some cases must have more governmental funding to continue their missions. But the idea that all of the hospitals' financial problems can and will be solved only by somebody in Trenton or Washington writing a big check distracts from what the Report says hospitals must and can do to help themselves.
          In short, and in the spirit of the big game this Sunday, the Reinhardt Commission Report essentially urges New Jersey hospitals to focus on their "blocking and tackling", those elements of the game that don't get the media attention or the big money endorsements, but tend to separate the winners from the losers. In particular, the Report contains a thorough and insightful analysis of the relationship of hospitals and physicians, with recommendations for improvement that could have a major, positive impact on the financial performance of most hospitals. I think that's something worth talking about, and I plan to do so in some posts to follow.
          In the meantime, Go Giants!

Who Wants To Sell Their Hospital On The Auction Block?

          [Image: Auctioneer and assistants, Cheviot, Ohio, 2004, by Rick Dikeman]

         Less than three months ago, I wrote here (with reference to Boston's Carney Hospital) about the need for financially distressed hospitals to involve all stakeholders in a collaborative process in order to achieve the best overall result.  Now I see that two New Jersey hospitals have long since passed that moment of opportunity and find themselves up for auction in bankruptcy proceedings.  Yesterday, The Record reported that auctions were set for Pascack Valley and Barnert Hospitals.  Today, reports indicate that Barnert's fate awaits the outcome of further creditors' wrangling in the Bankruptcy Court, while one of the bidders for Pascack Valley  is seeking to delay the auction of that facility scheduled for February 4.
          It is hard to imagine that any of the "stakeholders" involved in the early days of a financially distressed hospital scenario would purposefully choose to resolve their common problem by way of an auction sale in Bankruptcy Court.  Such proceedings are intended and designed to yield the best result for the hospital's creditors.  Although the interests of other constituencies (the hospital's Board, employees, medical staff, patients and community) may be brought into play, the creditors (and more precisely, certain creditors) are driving the bus.  This is not inappropriate given the underlying purpose of the Bankruptcy Code to fairly allocate the debtor's assets among its creditors.  But it makes no sense for these other constituencies to get on this bus if they have any choice in the matter.
          They often do have that choice, but fail to seize the opportunity.  It occurs well before the "B" word is first openly discussed, but when leadership of the hospital knows (or should know) that the status quo cannot be maintained.  Once that moment passes, the options available to the stakeholders begin to diminish, little by little, until one day there is no choice but to close the doors and hold an auction.
          The recently released Final Report 2008 of the New Jersey Commission on Rationalizing Health Care Resources (a/k/a the "Reinhardt Commission Report") addressed this problem to some extent by recommending (at Chapter 15, page 181) that state regulators create an "Early Warning System" to monitor and detect negative financial trends, and "to intervene at the level of hospital governance and management in a graduated fashion based on severity of financial problems and responsiveness of management."  Although a laudable effort, my guess is that this process will in many cases come too late, and when it does, will put state regulators in the driver's seat. 
          The hospital's stakeholders need to do better.  They can, but only through exercise of  leadership that acknowledges the realities of the hospital's predicament, and moves beyond pointing fingers and posturing into a collaborative process to find a solution.

Werner Institute To Host Health Care Conference

         [Image: Omaha jazz great Lewis "Luigi" Waites plays the vibraphone during a tribute to Duke Ellington, July 29, 1999, Photo by Jim Williams, for "Joselyn Art Museum: Jazz on the Green," a Nebraska Local Legacies project]

         I just heard from Debra Gerardi, Chair of the Program on Healthcare Collaboration and Conflict Resolution at the Werner Institute for Negotiation and Dispute Resolution at Creighton University.  Debra alerted me to an upcoming program at the Werner Institute that should be considered by anyone interested in healthcare dispute resolution.  Creating Cultures of Engagement in Health Care - International Conference and Dialogue: New Models for Addressing Conflict, Disruption and Avoidance in Health Care, will be held at Creighton in Omaha on June 3-5, 2008.

        As stated in the program description on the Werner Institute's website, the purpose of the conference is to provide participants with an opportunity to:
  1. Learn how to apply principles and practices from the field of dispute resolution to upcoming mandates for change including the new 2009 JCAHO leadership standards related to disruptive behavior and conflict management;
  2. Learn the principles guiding conflict resolution practice in health care including the essential components for conflict management training programs;
  3. Working with experts in health care mediation, negotiation and collaborative law, create an action plan for advancing the outcomes of the conference dialogues and create an ongoing community of experts.
       A description of the Conference's Premises makes it clear that the Werner Institute is on the mark with this program in matching a discussion of conflict resolution theory with an examination of the current culture of healthcare delivery.  And you can check out Luigi while you're there.

       Thanks again, Debra! 

Economic Credentialing: A Cooperative Approach

[This post is taken from my longer article, "Economic Credentialing -  Hospitals and Physicians at the Crossroads", appearing in the New Jersey Lawyer Magazine, February 2007.]  

          "Economic credentialing"  generally refers to any hospital policy of limiting membership on its medical staff, or the right to exercise certain clinical privileges,  to those physicians who have demonstrated patterns of practice in keeping with announced economic parameters.   Implementation of a successful program of economic credentialing will be more likely if it includes the following components:

  1. development of a persuasive financial analysis to demonstrate the necessity of the desired changes in physicians' behavior;
  2. solid medical support for the safety and efficacy of the desired behavior required by the rules;
  3. an outlier provision to recognize extraordinary cases that fall outside the normal range of circumstances that justify the rules;
  4. an enforcement mechanism based upon a percentage of compliance that can start at the current mean and adjust to the optimal level over a reasonable time;
  5. consideration and approval of specific standards by each department or division of the medical staff to which the rules will apply;
  6. initial and ongoing education of the entire medical staff concerning the scope and benefit of the rules; and,
  7. periodic reevaluation of the scope of the rules in light of medical literature and the experience at the hospital.

[Image: Zipper _animated.gif, by DemonDeLuxe (Dominique Toussaint]

Hospitals and physicians share an interest in the hospitals' financial viability.  They also share an interest in maintaining facilities of the highest quality and providing the best patient care possible.  These interests are enough to unite them in confronting the overwhelming economic pressures facing hospitals and physicians today.  Through their cooperation, economic credentialing can become a positive force for change within hospitals. It can form the foundation for the successful hospital-medical staff relationship of the future.

Healthcare Conflicts Appropriate For ADR


           [Image: Cliffs of Moher, Ireland, Photo by Tobias Helfrich, March 27, 2004]

          The range of conflicts arising within the healthcare industry that could benefit from the application of an alternative dispute resolution process is as broad as one’s imagination.  This is a partial list of the circumstances in which conflicts can arise and ADR can be used effectively.

  • Contracts between hospitals, physicians and other providers for professional services  (conflicts arising in their formation, operation, renewal or termination)
  • Contracts with vendors (conflicts arising in their formation, operation, renewal or termination)
  • Joint venture agreements (conflicts arising in their formation, operation or termination)
  • Medical staff relations (conflicts arising in interpretation or amendment of bylaws, inter-department issues or clinical policies)
  • Medical staff privileges (conflicts arising in individual applications or disciplinary matters)
  • Managed care agreements (conflicts arising in their formation, operation, renewal or termination)
  • Disposition of financially distressed facilities (conflicts involving creditors, government regulators, staff and community)
  • Inter-institutional affiliations, mergers and acquisitions (conflicts arising in their formation, operation or termination)
  • Physician practice acquisitions (conflicts arising in their negotiation or unwinding)
  • Governance matters (intra-corporate board conflicts, including conflicts concerning management  performance or bylaws revisions)
  • Patient relations (conflicts arising in consent to treatment, quality of care, medical errors, billing and collection matters)
  • Governmental regulation (conflicts arising in licensing, compliance or enforcement matters)
  • Employment issues (conflicts arising in employee discipline or termination)
  • Professional practices (conflicts arising in their formation, entry of new partners, withdrawal of partners, retirement or dissolution)

Why ADR Works In Healthcare, Reason #3

          Completing the thought addressed in the two previous posts, there is a third reason why ADR works well in resolving healthcare industry disputes.

[Image: "Smeden og bageren". Illustration by Theodor Kittelsen for Johan Herman Wessel's poem]

Reason #3. 

          Parties to a healthcare dispute can especially benefit from ADR because the unique and complex subject matter of their conflict can be readily accommodated.  By selecting an ADR process and a neutral best suited to the conflict at hand, the parties move immediately into an efficient and productive mode of dispute resolution.  Resorting to traditional courtroom litigation often requires that a judge be educated on the parties’ business model, the world of healthcare finance and reimbursement, and a variety of legal constraints unique to the healthcare field.  Experience indicates that this is a difficult, time consuming and expensive process.  Although most judges are highly intelligent and capable, there is only so much time that can be devoted to each case.  Moreover, most judges sit in courts that handle cases of all varieties, in which healthcare cases are a relatively infrequent occurrence.

          By selecting an ADR neutral with substantive knowledge of the healthcare business and healthcare law, the parties achieve not only efficiency, but a much greater likelihood that they will obtain a result that is fair and mindful of both parties’ real interests.  Although the precise role of the neutral varies within the ADR process selected, the neutral can often help the parties and counsel better identify their interests and how they might mesh with those of the other party.  Where common ground is difficult to find, the neutral can help each party better understand all consequences of the proposals on the table, as well as those of “walking away”.  Sometimes, the neutral’s best value comes from affirming something a party has already heard from counsel, but better accepts with the neutral’s concurrence.  The credibility of the neutral as someone who truly understands the conflict just as well as the parties and their counsel is critical to achieving this result.

          Many examples of this advantage of ADR in healthcare can be imagined, but one may illustrate the point.  A hospital that has “exclusive” contracts with two medical groups to provide two different kinds of medical services at the hospital is faced with a dispute between the groups over which of them has the right to perform a new procedure, a dispute which quickly becomes a three way conflict involving the hospital.  Such “turf battles” are not unusual.  Aside from reviewing whatever the parties’ existing contracts say on the subject, the resolution of this conflict may require consideration of expert input on the impact of the outcome on patient care; the application of the hospital’s medical staff bylaws; provisions of existing managed care agreements;  Medicare reimbursement rules concerning permissible billing by the respective groups; state law and regulations governing hospital licensing and permitted scope of medical practice; and the resolution of other previous (or potential) “turf battles” at the same hospital.  Although the use of ADR in this case may not make all parties wildly happy, the neutral’s appropriate and timely attention to all of these factors will vastly improve the quality and fairness of the outcome.

Why ADR Works In Healthcare, Reason #2

          Continuing the thread started in my last post, there are several reasons why ADR works especially well in the healthcare industry. 

[Image: Photo of Coins in the Trevi Fountain in Rome being collected at early morning, by Giovanni Dall'Orto, March 2005]

Reason #2. 

          The parties to a healthcare dispute often (although not always) have interests at stake other than money, or which cannot easily be reduced to a specific dollar demand.  Traditional courtroom litigation is designed primarily to determine which party to a dispute must pay the other party, and how much.  Although courts can grant “equitable relief”, essentially ordering one party to do or stop doing something, that option is limited in scope and driven by the form of the prevailing party’s plea for relief.  In contrast, ADR processes embrace the notion that flexible solutions, tailored to the parties’ unique interests, offer  the best outcome to any dispute.

          An example of this advantage of ADR would be a dispute between a hospital and a medical group over the interpretation of the group’s contract to provide certain medical services at the hospital.  The dispute could involve any number of issues important to both parties, but could easily place the parties in a situation where the contract seemingly must be terminated, and one side will then sue the other for breach of contract.  Neither party in such case really wants to sue the other for money damages, nor do they want the disruption to patient care and hospital services that would accompany protracted litigation.  Courtroom litigation in such case will ultimately assure that the parties’ legal rights are determined and enforced, but it will also create the negative collateral effects that come from using too dull and heavy a tool.  The use of ADR processes in such a case would provide the parties with options and alternatives from which to jointly reach a workable solution.

          Other examples of this advantage of ADR would be disputes over the medical staff privileges to be granted by a hospital to a physician or other practitioner; conflicts between a hospital and its medical staff concerning the interpretation or amendment of the medical staff’s bylaws; disputes within the board of trustees of a health system concerning the system’s mission, or the performance of management; and disputes among providers concerning quality of care or patient access issues.  Although financial considerations may be important in all these disputes, in none of them does either party seek a payment of money.  ADR processes, as determined by the parties, could be focused immediately upon what the parties in such cases really care about. 

Why ADR Works In Healthcare, Reason #1

          Alternative dispute resolution (or “ADR”) is increasingly being used to resolve conflicts arising in all facets of society.  The chief benefits of ADR (cost savings, faster results, confidentiality, and the parties’ control of the process) have been well established.  ADR is particularly appropriate for use in the healthcare industry for several additional reasons, the first of which is described today:

[Image: Table 10 from Gilbert Beckett, A Comic History of Rome  c. 1850, Cicero denouncing Cataline]

Reason #1. 

          The parties to a healthcare dispute often have some interest in (or need for) a continuing relationship after the current dispute is resolved.  By its nature, traditional litigation is an adversarial and combative process.  The objective of each party’s counsel is to crush the other party’s case, and in the process, the other party is often hurt as well (if not destroyed).  In contrast, although ADR involves advocacy of both sides of the conflict, the parties have jointly committed to a process of their choosing to reach a fair result that both will accept.  The likelihood of a viable relationship after resolution of the dispute is thus vastly improved.

          Examples of this advantage of ADR could occur with respect to the relationships between a hospital and members of its medical staff; partners to a healthcare joint venture; members of a professional practice; health providers and their patients; and health insurers and health providers. Because the need for healthcare services continues to grow, and there are a limited number of established participants in the delivery of (and payment for) those services, there is a significant incentive in many disputes for both parties to put their conflict behind them.

Starting a blog on Healthcare ADR

[Image: Musher Thomas Knolmayer at the Willow, Alaska start point of the 2005 Iditarod sled dog race, Photo by Tech. Sgt. Keith Brown]

          With this post, I start my first blog and what I think is the only blog site devoted to the topic of alternative dispute resolution in the healthcare industry.   As stated above on the masthead, I intend to blog at the intersection of ADR and healthcare law.  Both of these topics are well covered separately elsewhere (see links and blogs in sidebar), and I will try not to duplicate those efforts. 

          To make this site most useful, and to bring some order to my thoughts, I am dividing the world of ADR For The Healthcare Industry into topics that make sense to consider separately.  In alphabetical order, this blog will discuss alternative dispute resolution in the context of:

Commercial Healthcare Disputes

End of Life and Treatment Decisions

Healthcare Arbitration

Healthcare Mediation

Healthcare Regulatory Actions

Hospitals, Physicians and Medical Staffs

Managed Care Payment and Coverage Issues

Medical Malpractice Claims

These topics will overlap, and undoubtedly will subdivide and recombine over time.  But this is where I will start.  Let me know what you think.